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PRICE, Figureo, Difference between Contraction and Decrease in Demand, SA, Contraction of Demand, Decrease in Demand, A This is caused only by change in own, price of the commodity., (i) This is caused by change in determinants,, other than own price of the commodity., (ii) Several Causes: These include decrease, in income, decrease in price of the, substitute good, increase in price of the, complementary good, and change in tastes, and preferences against the commodity., (ii) Increase in, commodity is the only cause., own price of the, (ii) Diagrammatically, this is shown as, an upward movement (right to left), on the same demand curve (refer, Fig. 6)., (ii) Diagrammatically, this is shown as a, backward shift in demand curve (refer, Fig. 8)., 7. Cross Price Effects: How Price of Related Goods, (Substitute/Complementary) affects oilo, Demand for a Commodity?, Effect of change in price of a related good on the demand for a, commodity is called cross price effect., We know related goods are:, (i) substitute goods, and, (ii) complementary goods., Accordingly, we can split our discussion into two parts, as under:, (i) Demand for a Commodity in relation to Price of the, Substitute Good: Let us consider tea and coffee as two, substitute goods. Let tea be the commodity demanded of, which demand curve is D1 as shown in Fig. 9., 6, K1, K2, Demand curve for, when price of the, (coffee) increases, shifts from D to D, D2 (Tea), D,(Tea), even when its pri-, QUANTITY, 95